CyrusOne Inc

Good morning and welcome to the CIRES I First Quarter 2021 Earnings Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Mr. Michael Schaefer, VP of Capital Markets and Investor Relations. Please go ahead.

Thank you, Nick. Good morning, everyone, and welcome to Cyrus One's first quarter 2021 earnings call. Today, I'm joined by Bruce Duncan, President and CEO, Catherine Motlock, CFO, and John Hatem, COO. Before we begin, I would like to remind you that our first quarter earnings release, along with the first quarter financial tables, are available on the investor relations section of our website at cyrusone.com. I would also like to remind you that comments made on today's call and some of the responses to your questions deal with forward-looking statements related to CIRAS 1 and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are detailed in the company's filings with the SEC, which you may access on the SEC's website or on ciras1.com. We undertake no obligation to revise these statements following the date of this conference call. except as required by law. In addition, some of the company's remarks this morning contain non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release, which is posted on the investor section of the company's website. I would now like to turn the call over to our president and CEO, Bruce Duncan.

Thank you, Michael, and welcome to Cyrus One's first quarter earnings call. I want to begin by by acknowledging and thanking our team for their tremendous effort during the winter storm that impacted Texas in late February, keeping our data centers operational and taking care of our customers. While it was a very difficult week for many throughout the state, the expertise, dedication, and hard work of our people helped us manage through these unprecedented circumstances. Now, turning to the quarter, beginning with slide four, despite the negative impact of higher electricity rates in Texas due to the storm, we had good financial results, which Catherine will discuss in more detail shortly. We also had a good leasing quarter, signing approximately 28 megawatts, totaling $35.4 million in annualized GAAP revenue. primarily driven by bookings from hyperscale customers in our U.S. markets. We ended the quarter with a record backlog of approximately $113 million, positioning us well for continued growth this year and beyond. Moving to slide five, we completed construction on developments in the New York metro area and Frankfurt. totaling approximately 78,000 colocation square feet and 14 megawatts. Our development pipeline, as of the end of the quarter, consisted of projects across the U.S. and Europe, totaling approximately 380,000 colocation square feet and 100 megawatts, with 69% of the square footage under development pre-leased. We are also excited to announce the execution of an agreement to acquire a 12-acre development site in Frankfort to support growth in one of our leading markets. We continue to maintain a strong balance sheet with low leverage and significant liquidity to fund our growth, including $385 million in available forward equity. Slide 6 provides detail on our leasing results for the quarter, as well as the revenue contribution across our portfolio by industry verticals as of the end of March. Our hyperscale customers accounted for 79% of the annualized GAAP revenue signed during the quarter, with the lower average pricing of $103 per kilowatt. and with a higher average lease term of 9.7 years, reflecting the mix heavily weighted toward this segment. Over the trailing 12-month period, our bookings have totaled 15% of our base revenue. This indicates that we are still generating strong top-line growth, net of the impact of churn, despite having a much larger business than we did a few years ago. As of the end of the quarter, 51% of our total revenue was from hyperscale customers, and 49% was from enterprise customers. Turning to slide seven, our interconnection revenue was up 10% in the first quarter. In the bottom left-hand corner of the slide, we've highlighted some of our key portfolio metrics. including the NOI contribution of 92% from owned facilities. In addition, we have a relatively young portfolio, a high-quality customer base with nearly 80% of revenue coming from the Fortune 1000, and long-term leases. As the right-hand side of the slide shows, we continue to make good progress on ESG initiatives. which, as we have discussed before, is an area of focus for all of our stakeholders. We recently announced that our Carrollton location in the Dallas area will be our second net positive water data center, following the announcement of our Phoenix location as a net positive water data center last year. Water efficiency projects resulted in a two-thirds decrease in water consumption at our Carrollton facility in 2020, and we continue to take steps toward the further conservation of one of the most important natural resources. Moving to slide eight, I want to highlight our U.S. leasing results, since discussing this is an area of emphasis on our third quarter 2020 call, given our loss of market share over the last few years. During the last two quarters, we have averaged approximately 24 megawatts and just over $33 million in annualized GAAP revenue signed, up over 100% compared to the prior four-quarter average. Nearly 60% of the leasing during this period was with hyperscale customers, including 78% in the first quarter. Not surprisingly, These customers are deploying in our key hyperscale markets, notably Northern Virginia and Phoenix. Importantly, we have capacity across our locations to accommodate larger deployments, and our ability to deliver technical solutions to meet specific customer requirements has contributed to the strong recent performance. While European leasing in the first quarter was softer than it has been in recent quarters, we continue to have productive discussions with our hyperscale customers about potential opportunities in these locations. One of the benefits of having a broad and diverse portfolio with a presence across the key data center markets in both the U.S. and Europe is that we are less dependent on any particular market for leasing to drive growth. Overall, we continue to be encouraged by the demand we are seeing, particularly from hyperscale customers. And it is our job as a team to convert this demand into signed leases. Turning to slide nine, as I mentioned earlier, we are excited about the execution of an agreement to acquire a 12-acre development site in Frankfort. This will give us 63 megawatts of additional power capacity to continue to grow in one of the strongest data center markets in Europe. More broadly, we have shell and land inventory across key locations in the U.S. and Europe to respond to demand as it materializes. This represents more than 1,000 megawatts of total potential incremental power capacity and would more than double the size of our footprint. Our development capabilities allow us to bring online significant capacity quickly throughout our portfolio, including the scale builds that are required by hyperscalers. As the slide shows, we have delivered 529,000 co-location square feet and 95 megawatts over the past 12 months. Our strong balance sheet with substantial available liquidity gives us significant capacity to fund developments at a relatively low cost of capital. In closing, the demand environment remains strong, and we are well positioned to capitalize on opportunities across our markets. Before I turn the call over to Catherine, I want to remind you that we will be hosting our Virtual Investor Day on June 16th. I and the other members of the senior management team look forward to reviewing industry trends, our business, and our strategy, and we hope you will be able to attend. So please RSVP and get that on your calendar. With that, Catherine will now provide more color on our financial performance for the quarter and an update on our guidance for the year.